Would you buy with this issue?

Question

I'm looking at buying a condo that needs a complete remodel and also has a huge raised crack in the slab going about 8 feet right in the center of the unit. There are no disclosures and the cause is unknown. HOA has refused any responsibility. It's priced about $90k under market. I'm considering it for a buy and hold rental. Considering just the cosmetic work it needs the list price is good. Factoring in this unknown cost of repairing the crack.... I'm thinking the price is too high. Sent pictures to my contractor and he said he wouldn't know costs to repair without opening it up. Could be a simple patch repair, but could be much more extensive. Curious what, if anything, others would consider offering considering this unknown? What other factors would you consider? How much under market value would make the unknown worth the risk?

Will Barnard · Answer

So this crack is large but an easy fix. You would need to saw cut the concrete open so that you have about 12" of open width around the crack. Then you would need to tie in rebar dowels with epoxy to tie in both sides and pour in new cement. The problem is, fixing the crack is easy, knowing that it will not continue or get worse down the road is the main problem. Your contractor needs to visit the site and check the footings of the building. If they are compromised and need to be repaired, then that is an HOA issue and not your responsibility. If they fail to take responsibility then you would have a lawsuit on your hands. That is NOT conducive to a profitable investment so I personally would walk from it.In short, identify the problem and know for fact if it is ongoing or not. If not, proceed assuming your numbers fit, if ongoing, run.

Alf Penland · Answer

@Maria D.type @ then the first few letters of the name without a space between @ and their name. After a few letters, it will pop up a list of people, then click the one you want to tag. If you are typing a common name, like Mark or Sally, you need to type the whole name and give it a second to populate the list.

Maria D'Aura · Answer

@Ralph_R. You make some good points. I have rentals in two other HOA's, one of which I'm on the board, and so far so good. Have even endured a special assessment in one. But you are right, buying and holding this one is probably a bad choice. As a fix and flip, I think it could work. HOA is not doing anything about the floor so I would have to fix it as part of the reno. The one other negative is if I fix and flip I anticipate it being completed around November/December. Quite possibly the worst time of the year to sell. So have to consider if holding longer would make sense.

Ralph R. · Answer

Maria D. You didn't say your intention for this property. If it's buy and hold walk. It has 2 strikes maybe 3 strikes against it. Number one is the crack. Number 2 is its in an HOA. They are not always rental friendly and can change. Number 3?? Is what if that's a foundation settling and the HOA does fix it. They may choose to pass the cost of repair on to the owners as increased dues or a special assessment. Then you gotta pay to fix it anyway. I'm no flipper but it may work as a fix and flip but might be hard to sell depending on way the HOA handled the floor if it was their responsibility. You loose control if they take over the repair. Will it be fixed in a week or 6 months?? Same issue about who will end up paying the bill. If you want to live in it and don't care about cash flow or ROI the you may be ok to buy it, fix the floor and do the cosmetics slowly. If it was me I wouldn't even do that. I would have mixed it already. RR

Maria D'Aura · Answer

@Alf Penland Thank you! It worked.

Sebastian Marroquin · Answer

@Maria D. Hello. I would say or suggest to: NEVER BUY SOMETHING WITH AN UKNOWN THIS BIG: easy fix: ask someone: or go on yelp and find a structural/ foundation company (they specialize in foundations, retaining walls etc. ) : i've used them before and they are about $200 to $300 (for the assessment). The crack looks big... but sometimes like in my buyer's situation: it didn't matter: as it was just visual and it did not affect the structural integrity of the property. $300 could save you a lot of time, and thousands of dollars down the line. Once you get the assessment : they can maybe wave the initial cost and deducted from their bid to fix or you can have your contractor fix it for a fraction of the cost. Where are you buying? At the end of the day: do your numbers: if the cost to fix plus the purchase price plus renovations are below ARV : and you can make a profit then perfect move forward. IF not don't.... (be objective) and remove emotion from it.

Maria D'Aura · Answer

Also, can someone tell me how to tag someone in a post with the @ sign? I seem to be doing it wrong. thanks

Maria D'Aura · Answer

Sorry, it loaded sideways

Maria D'Aura · Answer

@clayton_barnesI'm confused too as to why the HOA wouldn't take responsibility. My contractor said he thinks the building has settled in the edges and this unit, being in the middle has suffered this crack as a result. Without opening it up worse case is needing to level the whole building, which couldn't possibly be the responsibility of just one unit in the HOA, but I don't know if there is more HOA history at this point. Contractor suggested a local repair could be done if the HOA doesn't want fix it at the foundation. Who knows how many years it's been this way. Here's a picture to show a better idea. Still considering if this is something I want to deal with.

Clayton Barnes · Answer

Ask your contractor what his worst case guess would be. If you go with that assumption you should be able to run the numbers and see if it still seems like it would work.On a side note I'm confused on what you're describing. Are you saying there is a "huge" crack in the foundation that is raised up? I'm surprised that foundation work is allowed by the HOA as it could potentially affect the structural integrity of any attached units etc.